Currently 56

[JohnDevereaux]

I'm John. I have been building my own retirement since age 25. I am absolutely paranoid about having enough to retire. I want to share where I am now and get some input from knowledgeable people, so here goes. I make about 80k/yr. I have no home debt, I paid it off years ago. I have 5 vehicles (none new) that I paid outright when purchased. I literally have no debt other than regular monthly bills. I have one son still in college, has 1.5 years left for a 4 year degree. I have paid out of pocket for all tuition, he will have no debt when finished. I have my 401k currently at 1.2 million (50% higher risk, 25 medium risk, and 25 low risk). I have 50k in bank balance, and about 15k cash (money I save to make purchases like vehicles when needed). I estimate I should be able to get my 401k to 1.5 million by 2024. My goal is to retire at 60ish. I would love to do income investment to generate my income without hitting the principal too hard and leave a significant sum for my two children. I hope to be able to generate 70-80k /year. I'm guessing a 6% annual return would be required. Is this feasible?

 

[REWahoo]

John, check this out, it should help answer many of your concerns: Some Important Questions to Answer Before Asking - Can I Retire?

 

[Golden sunsets]

With no other income other than income from your investments it appears that your goal would have a lowish success rate. However we don't know what your (and your spouse's) anticipated SS will be. Will there be any other pensions or annuities. Can you provide that info?

Read up on the 4% rule. 4% of your projected portfolio of $1,500,000 is $60,000. Will you have other sources of revenue to supplement the safe withdrawal of $60,000 to meet your expenses of $80,000 and does that $80,000 expense include taxes and medical expenses? A 6% withdrawal rate is only sustainable for a short period of time bridging until SS or pesions kicks in.

 

[Dtail]

What are your yearly expenses?

 

[HI Bill]

Welcome, John! Sounds like you've made great progress. As others have asked, what will your annual budget be in retirement? When will you take SS? When you have a chance, run your numbers through FIRECALC (link on the right side of the home page). Assuming you eliminate saving and college expenses, but add health insurance, you'll probably be close!

 

[USGrant1962]

John,

As others have said, it sounds to me like you are close to being on track. The best thing to do is build a model in FIRECalc including SS and any pension you might have.

But the most important input in FIRECalc or any other retirement planner is your expected/planned spending. So getting a good handle on that will go a long way to increasing your confidence in ER.

 

[pb4uski]

John, your estimated $1.5 million at age 60, along with social security, should be able to provide $70-80k year. You might want to enter your details into FIRECalc. I think you'll be plesantly surprised.

 

[Mdlerth]

The good news is you could save a bunch of money by switching to GEICO

Ditto all the earlier responses about running FIREcalc, reading the Important Questions thread, find out what your SS picture will be, etc.

I'll add a few more observations. First, you've got 1.2M in your 401k, with a target of 1.5M four years from now. The good news is 25% growth in 4 years is a perfectly reasonable goal, especially when the market's booming, you're still contributing and if you get an employer match. The bad news is that this particular market has been booming for a while and might lose its mojo just at the most inconvenient time. Make sure your asset allocation provides enough downside risk protection.

Second, you mention wanting ~6% annual returns. The good news is that equity investments probably will average a bit more than 6% over the long term. The bad news is that your 6% average will NOT be consistent, year-over-year. If your retirement starts out with a few years of below-average returns, but you're making 6% withdrawals in those years, you'll be in trouble. Read up on the concept of "Sequence of Returns Risk".

Third, you said you hope to score 70-80k, which is about what you earn now. The good news is that if you're currently saving heavily for retirement, you probably don't need to keep figuring that into your post-retirement budget. Your expenses might be significantly lower. The bad news is that maybe they won't be lower; when your free time is no longer constrained by a j*b, you could find pursuing hobbies, travel, entertainment, etc., might eat up more money than they did when you were w*rking. Make sure you have clear data on what your spending will be and how your activities affect it.

Fourth, I'll just ask, because I'm curious, why you don't mention SS? If you are eligible for benefits, it could make a world of difference to the success of your plan. Good luck.

 

[The Cosmic Avenger]

Third, you said you hope to score 70-80k, which is about what you earn now. The good news is that if you're currently saving heavily for retirement, you probably don't need to keep figuring that into your post-retirement budget. Your expenses might be significantly lower. The bad news is that maybe they won't be lower; when your free time is no longer constrained by a j*b, you could find pursuing hobbies, travel, entertainment, etc., might eat up more money than they did when you were w*rking. Make sure you have clear data on what your spending will be and how your activities affect it.

This is basically what I was going to add. John, you sound frugal, so when (not if) you draw up a retirement budget (from looking over your last 2-3 years of expenses), you can list expenses as essential or not, and you'll probably find that IF we enter a recession any time soon, you can probably get by for a year or two or three on a much lower budget, or if it's soon, you may decide to keep working a bit longer and buy, buy, buy while the market is down!

You'll also notice that all that money you've been saving no longer has to come out of your budget, and with two sons, your grocery bill will probably plummet!

 

[JohnDevereaux]

What are your yearly expenses?

Well, Right now I spend about 700/month on college tuition and 20% (about 1200/mo) into my 401k and auto insurance on two kids vehicles (300/mo). I will be able to cut that from my expenses when I retire. My home expenses (Utilities, home insurance, car insurance, food) will only be about 1200/mo. I priced health insurance and plan on paying 1800/mo. until I qualify for Medicare at 65. So I can squeak by on 3000/mo. or 25k/yr. I plan on collecting SS at 62 (1773/mo). I will not be traveling, not keen on that, plus all my family are local. I just want to hunt, fish, garden, and maybe pick up a few bucks doing some gun smith work in my shop. I plan on never paying a car note, I can fix anything on a vehicle I need except automatic transmissions. I am currently trying to put everything into FireCalc to assess. Thank You ALL for the help!

 

[Dtail]

Your results should be 100% on Firecalc. You should be ready to go.
If you need assistance with Firecalc input, fire away.

 

[pb4uski]

.... So I can squeak by on 3000/mo. or 25k/yr. ...

You might want to add the cost of new batteries for your calculator to the budget.

Seriously though John, if that is your budget and you can manage your income, you may qualify for ACA subsidies that would significantly reduce your cost of health insurance between when you retire and when you are eligible for Medicare at age 65.

 

[pj.mask]

Yes, with 1,800 of that $3,000 budget - if you only withdrew $2,000/mo you would probably have the same spending income and insurance after subsidies (If ACA or better stay as law).

Our 3 biggest expenses in order are:
Child care
Housing
Health insurance

And they take up 70% of our budget.

 

[Dtail]

Yes, with 1,800 of that $3,000 budget - if you only withdrew $2,000/mo you would probably have the same spending income and insurance after subsidies (If ACA or better stay as law).

Our 3 biggest expenses in order are:
Child care
Housing
Health insurance

And they take up 70% of our budget.

Wow.
Our 4 largest expenses are in order:
Housing
Food
Travel
Medical

They take up 55% of our budget.

 

[DogGone]

Yes, with 1,800 of that $3,000 budget - if you only withdrew $2,000/mo you would probably have the same spending income and insurance after subsidies (If ACA or better stay as law).

Our 3 biggest expenses in order are:
Child care
Housing
Health insurance

And they take up 70% of our budget.

interesting... also 50% of our budget